Cinedigm Corp. 10-Q Summary
Reporting period: Three months ended June 30, 2021, compared with the three months ended June 30, 2020. The filing identifies the registrant as Cinedigm Corp.; the request metadata uses the name Cineverse.
Business context and results
Cinedigm operates a Cinema Equipment business that supports digital cinema systems and a Content & Entertainment business that distributes films, television and other content through digital, streaming and physical channels. The company reported two major revenue drivers this quarter: higher streaming and digital revenue, and a large digital-projector sale.
| Metric | Quarter ended June 30, 2021 | Prior-year quarter |
|---|---|---|
| Revenue | $15.015 million | $6.018 million |
| Operating income (loss) | $2.774 million | $(2.615) million |
| Net income (loss) | $5.194 million | $(19.870) million |
| Net income (loss) per diluted share | $0.03 | $(0.21) |
| Adjusted EBITDA, non-GAAP | $5.479 million | $(0.182) million |
| Cash provided by (used in) operating activities | $3.621 million | $(3.738) million |
Operating margin was approximately 18.5%, versus approximately negative 43.4% in the prior-year quarter. The filing does not present a standard gross-margin measure. Revenue grew 149% overall: Cinema Equipment revenue rose 930% to $6.231 million, mainly from $5.575 million of digital system sales; Content & Entertainment revenue increased 62% to $8.784 million. Within that segment, OTT Streaming and Digital revenue rose to $7.006 million from $3.256 million, while Base Distribution revenue fell to $1.778 million from $2.157 million.
Financial position, cash flow and material changes
- At June 30, cash and cash equivalents were $13.355 million, with an additional $1.000 million of restricted cash. Cash, cash equivalents and restricted cash totaled $14.355 million, down $3.494 million during the quarter.
- Working capital was negative $9.5 million; accumulated deficit was $469.0 million. Current liabilities were $54.603 million against current assets of $45.150 million.
- Reported notes payable at June 30 totaled $3.418 million: $3.031 million of non-recourse Prospect debt and $0.387 million under the East West Bank credit facility. The company subsequently paid the remaining Prospect principal, including $3.1 million after quarter-end, and reported that the loan was fully repaid by July 9, 2021. The credit facility maturity was extended to September 28, 2021; the company said it could not draw additional amounts during the extension pending an amendment.
- The $2.152 million PPP loan was forgiven, with the company recognizing a $2.178 million gain for forgiveness and extinguishment. The lender’s SBA approval notification was received July 7, 2021, effective as of June 30.
- Accounts payable and accrued expenses increased to $50.213 million from $46.627 million. Net cash used in financing was $6.324 million, including $4.755 million of note repayments and $1.569 million of net revolving-credit repayments.
- In June, Cinedigm acquired FoundationTV for stated consideration of approximately $5.2 million, including $0.7 million cash, 1,483,129 shares valued at $2.5 million, and deferred payments. The acquired developed technology was valued at $3.2 million and goodwill at $2.037 million.
Management outlook, risks and unusual items
- Management said available cash, expected operating cash flows, existing arrangements and potential new capital sources should fund contractual obligations and operating needs for 12 months from filing. It also warned that additional capital may be needed and that failure to grow revenue, obtain capital or control discretionary spending could harm liquidity and results. No specific revenue or earnings guidance was provided.
- COVID-19 continued to affect operations. Theatrical releases and box office activity improved from the prior year, but remained below pre-pandemic expectations amid capacity limits and shorter theatrical windows. Fewer theatrical releases could reduce virtual print fees and equipment-sale opportunities. Content production delays, shifts to studio-owned streaming services and cord-cutting were also cited as risks.
- Quarterly GAAP profit included the PPP-related gain and a $0.334 million increase in the fair value of the Starrise investment. Starrise’s market-price changes are volatile; the investment was reported at $6.777 million. The prior-year quarter included a $15.794 million Starrise fair-value loss.
- The company reported material weaknesses in internal control over financial reporting, including deficiencies in the financial close process and information and communication controls, associated in part with accounting staff turnover and insufficient staffing. Management said remediation had begun, but the weaknesses were not yet considered remediated. Disclosure controls were deemed ineffective as of June 30, 2021.
- Management reported no material change to the risk factors in its prior annual report. The filing lists no legal proceedings and no defaults upon senior securities.
Important facts for investors to verify
- Whether growth in streaming and digital revenue continues, and how much operating performance depends on projector sales versus recurring revenue.
- Cash generation, working-capital needs and the company’s ability to meet obligations after repayment of Prospect debt, including the credit facility’s September 2021 maturity and draw restrictions.
- The remaining consideration and expected contribution from the FoundationTV acquisition, and potential dilution from share issuance and equity awards.
- Progress toward remediating the material weaknesses and restoring effective disclosure and financial-reporting controls.
- The sustainability of reported profitability after excluding the PPP forgiveness gain and volatile Starrise fair-value movements; Adjusted EBITDA is non-GAAP and is not a substitute for operating cash flow.